Developers often enter into a reservation agreement with future buyers before concluding a pre-purchase contract. On the basis of this agreement, future owners undertake to pay to the developer a booking fee confirming interest in the premises. Consequently, there may be doubts as to whether the developer's fee received should be regarded as a pre-payment or advance on the future supply of the dwelling and, therefore, how to recognise this charge for VAT purposes.
The booking fee was not used to finance the construction of the premises but was used for the company's current operations. If the customer wanted to charge this booking fee to the selling price, he would then make a declaration of intent to allocate these funds to the price and make a statement of deduction of the amount to the price.
According to the personal interpretation of the Director of the Tax Chamber in Katowice on 16 February 2015 The signature. IBPP2/443-1102/14/ICz, The booking fee on the date on which the company received it does not entail the performance of the benefit and is thus not subject to VAT on the date of receipt of the benefit.
Only if the booking fee is credited with a payment for the sale of a dwelling by, inter alia, the conclusion of a pre-contractual agreement, then, on the date of conclusion of that contract, it is converted to an advance payment and subject to a tax obligation.
The case concerned a company operating in the construction and sale of apartments. Persons interested in buying housing on the basis of the booking agreement paid so-called booking fees, the purpose of which was to demonstrate the readiness of one of the parties to future buyer to acquire the premises, and from one of the parties to the seller's undertaking to the buyer that, by the date of conclusion of the pre-contractual agreement, it will not conclude with the person third no contract resulting in an obligation to sell the premises.
The booking fee was not used to finance the construction of the premises but was used for the company's current operations. If the customer wanted to charge this booking fee to the selling price, he would then make a declaration of intent to allocate these funds to the price and make a statement of deduction of the amount to the price.
However, in a situation where the client, after signing the booking agreement and making the booking fee, resigned from the purchase of the premises for reasons attributable to the buyer, the seller retained bail.
On the basis of the facts indicated, the taxable person asked whether payments under the booking contract should be considered as payments, a fixed amount for the future delivery of the premises, and a tax liability would arise in accordance with Article 19a(8) VAT Act.
In the assessment of the Authority at the time of payment of the booking fee by the client until the conclusion of the pre-contractual agreement, this fee bears the character of a ‘council’ which, however, is in vain to be sought in the provisions on goods and services tax.
According to the wording, ‘causation’ is a monetary sum which is a guarantee of compliance with the obligation and is compensation in the event of default. The feature of the bail is that it can only be used in a strictly defined case, i.e. in the event of a default.
The security of performance of the contract, through the establishment of a bail deposit, is of a guarantee nature, which means that it is established in the event that the party to the contract that lodged the bail-out fails to comply with it. Then one of the parties to the contract may satisfy himself or her deposit.
In view of the circumstances of the case, the tax authority considered that the booking fees would not constitute a remuneration for the provision of services, nor could they be regarded as an advance on the purchase of a dwelling, but only confirm the actual interest of the Client in the offer and the willingness to acquire the premises.
In the light of the above, the payment of a booking fee to the developer's account shall not constitute a prepayment or advance for the future supply of a dwelling within the meaning of Article 19a(8) VAT Act. Consequently, the developer should not document such transactions with a VAT invoice.
Only if the booking fee at the time of the conclusion of the pre-existing contract with the client is credited, in accordance with the customer’s statement of will, with the payment for the sale of the dwelling, should it be assumed that the booking fee at that time is converted into an advance resulting in a tax liability under the Goods and Services Act, in accordance with Article 19a(8) VAT Act.
A similar position was presented by the Director of the Tax Chamber in Warsaw in interpretations dated 2 April 2014 (Name: IPPP1/443-214/14-4/AS) and of 28 March 2014 (Name: IPPP1/443-218/14-2/EK).